Benefits aren’t just perks you give your employees. Many benefits are required by law and non-compliance is not an option. Failing to provide for your employees can lead to legal issues, financial penalties, and tarnish your business’s reputation.
The rules for employer-provided benefits can vary based on the size of your business and your location. Figuring it out on your own can get a little complicated. So, we’re here to break it down for you. Here are the essentials, the basics, the benefits must-haves.
1. Worker’s Compensation Insurance
Forty-nine of the 50 US states require employers to provide workers’ compensation insurance (sorry Texas). What is it? It provides medical care and wage replacement for employees injured on the job. Specific requirements vary by state, but in general, if you have one or more employees, you must carry workers’ compensation insurance.
Financial repercussions can be severe if you don’t provide adequate workers’ compensation insurance. Your state could levy fines on a per-employee basis, enforce legal penalties, and even mandate jail time. Not to mention the financial cost of an injury lawsuit if your employees get hurt at work. Instead, get to know your state’s specific rules and make sure you have proper coverage.
2. Anti-Discrimination Policies
Anti-discrimination laws come into play for employers with 15 or more employees. These laws prohibit workplace discrimination based on protected characteristics, including race, color, religion, sex, national origin, disability, and, in some cases, age. Anti-discrimination is all about offering equal opportunities in the workplace and reasonable accommodations for employees with disabilities. Training staff and employees fosters a diverse and inclusive work environment and protects your business from lawsuits and penalties.
3. Family and Medical Leave (FMLA)
Even if it doesn’t apply to your business yet, you need to understand FMLA. The Family and Medical Leave Act applies to all employers with 50 or more employees within a 75-mile radius who have worked 1250 hours in the past year and have been with the company for 12 months or more.
FMLA requires you to give employees in certain situations 12 weeks of unpaid, job-protected leave per year. These circumstances may include:
- Long-term health conditions
- Recovering from surgery
- Having or adopting a child
- Needs arising from a spouse’s military service
- Caring for a loved one with a serious illness
4. Healthcare
If you’re an employer with 50 or more full-time employees (or full-time equivalents), the Affordable Care Act (ACA) says you must offer health insurance—full stop. And to meet ACA requirements, the coverage must cover at least 60% of typical medical expenses and be considered affordable for employees. Translation: their share of the premium for self-only coverage shouldn’t be more than 9.12% of their household income—as of 2023.
Failure to meet these standards could lead to hefty penalties under the ACA’s Employer Mandate (aka “pay or play” penalties). It isn’t just about avoiding fines, though. Health insurance benefits for employees keep your team healthy, happy, and present, which is always a win.
5. Disability Insurance
Nope. The Federal Government does not require disability insurance. But before you dismiss it from your benefits package, read the fine print. Some states, including California, New York, New Jersey, Rhode Island, and Hawaii, mandate that employers offer short-term disability insurance to cover a portion of an employee’s wages if they cannot work due to illness or injury.
Even in states where it’s not required, many employers still provide short-term or long-term disability insurance as part of their benefits package. Why? Because they’re smart. Disability employment benefits support employees, protect the company’s most valuable resource (its employees), and help employers stay competitive in attracting top talent. It is the foundation of a competitive benefits package.
6. Unemployment Insurance
Both state and federal laws require employers to pay into unemployment insurance programs to support employees who lose their jobs through no fault of their own. It is a safety net for your employees when life throws a curveball—whether it’s layoffs, downsizing, or other unexpected changes. These payments don’t come from out of employees’ paychecks; they’re all on you. While no employer loves extra costs, paying up now keeps you in compliance. Better safe than sorry.
7. Social Security and Medicare Taxes
No, they’re not picking on you. Every employer has a hand in supporting Social Security and Medicare alongside their employees through payroll taxes (FICA). Here’s how it works: you match your employee’s contribution—6.2% for Social Security (up to the annual wage cap) and 1.45% for Medicare (with no cap). If someone’s a high earner, there’s also an extra 0.9% Medicare surtax, but that’s on the employee alone. These contributions help fund retirement income, disability benefits, and healthcare through Medicare, making them a key part of your employees’ financial safety net now and in the future.
Compliance is Just the Beginning
Keeping up with compliance isn’t just a good idea—it’s necessary to protect your business from financial and reputational losses. However, providing key employee benefits comes with a kickback in the form of great employees.
If you want to attract and retain top talent, you need to show employees that you are serious about taking care of those who show up and take care of business every day. Understanding and following these requirements creates a desirable work environment where employees feel valued and protected.
Take action to ensure your employee benefits are in compliance. If you’re not sure where you stand, contact a benefits broker or HR professional. They can help you navigate the requirements of putting together a package that fits the unique needs of your business. Then, regularly update your policies to avoid unexpected issues. As your business grows and evolves so will your benefit needs. Dare to go beyond the bare minimum to provide for your employees. They’ll pay you back in spades.